1. Which of the following is not a characteristic of companies using just-in-time production systems?
a. employees are trained to operate more than one machine.
b. machine setup times are reduced.
c. machines are arranged by functions.
d. production is in small batches.
2. Morley Manufacturing is considering the manufacture of a new product. Morley was hoping to sell the product for $168 per unit and estimated the total cost per unit to be $120. Morley conducted market research and found out that the market is only willing to pay $154 for the new product. Using the target costing approach, what does the total per unit cost of the new product have to be if Morley wants to achieve the same markup on total cost percentage that was used in their initial estimates of cost and selling price?
a. $110 b. $100 c. $106 d. $109
3. Activity-based costing systems and traditional costing systems tend to always identify the same products as being the most profitable.
A. True B. False
4. Sleep tight company manufactures pillows using an activity-based costing system. The following information is provided for the month of June:
|
Activity
|
Estimated Indirect activity Costs
|
Allocation Base
|
Estimated Quan of allocation Base
|
|
Materials Handling
|
$3,150
|
Number of parts
|
4,200 parts
|
|
Assembling
|
$13,860
|
Number of parts
|
4,200 parts
|
|
Packaging
|
$2,730
|
Number of pillows
|
1,050 pillows
|
Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50. If the cost to purchase the same pillow from a supplier is $21, what should sleep tight do to maximize profits?
a. close down the business
b. continue to manufacture the pillow
c. purchase the pillow from the supplier.
d. since the cost to manufacture the pillow is also $21, the company would make the same profit whether it bought the pillow or manufactured it.
5. Target cost is the price that customers are willing to pay and is the maximum cost that the manufacturer is willing to incur.
a. True b. False
6.The cost of overseeing suppliers within the total quality management philosophy is a (n):
a. external failure cost
b. prevention cost.
c. appraisal cost.
d. internal failure cost.
7. Crump manufacturing has provided the following information regarding its activity-based costing systems:
Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $52 per purchase order.
Assembly department costs are allocated based on the number of machine hours and the cost allocation rate is $27 per machine hour.
Inspection department costs are allocated based on the number of inspection hours and the allocation rate is $39 per inspection hour.
Each unit produced has a direct materials cost of $70 and a direct labor cost f $65. Crump has an order for 500 units which will require 40 purchase orders, 750 machine hours and 50 inspection hours. What is Crump's operating income from the order if the units are sold for $225 each?
a. $22,670 b. $45,000 c. $20,720 d. $88,220
8. Target costing starts with the price that customers are willing to pay and then subtracts the company's desired profit to determine the target cost.
a. true b. false